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Commodities

Maize flour cost reduction fails to push up demand

Unga Limited CEO Nick Hutchinson
Unga Limited CEO Nick Hutchinson. FILE PHOTO | NMG 

Millers have revised upward the price of maize flour after their strategy of lowering the cost in order to increase demand failed to yield fruit.

They had reduced the cost to as low as Sh110 for a two-kilogramme packet from the previous Sh120 for the same quantity in order to attract buyers and have the stocks on shelves move more quickly.

“Our team had decided to keep the price down for some days to keep competition on their toes, but since the demand did not change much, they decided to increase the price,” said Nick Hutchinson, chief executive officer of Unga Limited.

Mr Hutchinson said overall demand for maize is down because of low consumer purchasing power.

A two-kilogramme packet of Jogoo flour had dropped to Sh111 but has now been increased to Sh118 with the same quantity of Soko, which had dropped to Sh110, now selling at Sh120 in retail outlets.

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Ken Nyagah, the chairman of United Grain Millers, said processors are struggling at the moment because of stocks that are not moving.

“We are now facing a serious financial cash flow because consumers are not buying a lot of flour since the outbreak of Covid-19, despite the fact that we have reduced the cost,” said Mr Nyagah.

Millers are buying a 90 kilogramme bag of maize at Sh3,300 in Nairobi with the cost having dropped from Sh3,600 last month.

Mr Nyagah said they are unable to collect imported maize, which is in Mombasa because it is more expensive than what they are buying in Nairobi.

A 90-kilogramme bag of imported Mexican maize is selling at Sh3,300 in Mombasa but when other expenses such as transport is added, it comes to Sh3,300 in Nairobi.

“We cannot buy expensive maize for milling when already the stock at which we bought at Sh3,300 is not moving,” he said.

The Treasury allowed millers to import maize at a reduced duty of 14 percent for the white produce and 10 percent for the yellow one.

Millers argue that if the 14 percent duty is waived, then the cost of maize will drop to Sh2,800 for a 90-kilogramme bag.

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